Rising U.S. oil and natural gas production is having a bigger impact on the U.S. economy than estimated a couple years ago, according to a leading economic consulting firm.

STORY HIGHLIGHTS

New energy sources account for 2.1 million jobs, report says

Natural gas production up 58%, prices down by three-fourths since 2007

Jobs include drilling, transport, and some manufacturing, especially in chemicals

Newly found sources of domestic oil and natural gas are having an even bigger impact on the economy than first projected, adding more than $1,200 last year to the discretionary income of the average U.S. family, a new study says.

The explosion in domestic energy production now supports 1.2 million jobs, directly or indirectly, says consulting firm IHS, in a study released Wednesday. That number will grow to 3.3 million by 2020, and new energy's contribution to U.S. families' disposable incomes will hit $2,000 per household per year by 2015, said IHS.

IHS' numbers are larger than findings by other economists, which also point to a major impact from shale oil and gas. The introduction of technologies like hydraulic fracking and horizontal drilling, which made it practical to recover previously unused oil reserves, has helped drive a 58% increase in natural gas reserves since 2007, cut the price of natural gas by nearly three-fourths, and sparked more than $120 billion in U.S.-based investment last year, IHS said. Its study was partly financed by a number of energy and manufacturing industry groups.

"Anyone who doubts the reality of this is not paying attention,'' said John Larson, vice president of IHS and co-leader of a team of 13 contributors from the firm's energy, economics and manufacturing-industry consulting groups. "You're seeing the production numbers in both gas and oil to support it.''

The biggest impact on many U.S. households is lower electricity and heating bills, accounting for about 75% of the average household's gains, Larson said. About $800 of that represents lower prices for natural gas-fueled heat and cooking, and $100 to $150 is from electricity rates lower than they otherwise would be, he said.

Government data back up most of this analysis. Residential natural-gas prices, which vary widely by state, have fallen between 12% and 32% since 2008, according to the U.S. Department of Energy. Electricity prices, however, have risen slightly on average. IHS' numbers were based on assumptions about what households would have spent if U.S. natural gas prices stayed near 2008 levels, Larson said.

Natural gas prices in much of Europe are three times U.S. levels, and Asian prices are even higher, reflecting the lack of new supplies there, he said.Cheaper electricity also shows up in the price of other manufactured goods, and some families get a paycheck from producing oil and gas, or working for companies that ship petroleum or make supplies for drilling and pipelines, he said.

Earlier, IHS had only estimated the impact of new gas supplies, without attempting to quantify the effects of new oil supplies pouring out of places such as North Dakota and the Eagle Ford shale in Texas. In December 2011, it had said the shale gas industry was supporting 600,000 jobs by 2010.

Moody's Analytics, another leading economics consulting firm, estimates that 1 million of the 2.7 million jobs gained in the U.S. between 2002 and 2012 were related to shale oil and gas drilling, Moody's economist Chris Lafakis said.

Growth in shale-related employment since 2008 was almost four times as much as Moody's forecast in 2009, and is growing twice as fast as the overall economy despite a hiring lull caused by lower natural gas prices, Lafakis said.

More domestic production is also slashing crude oil imports, which fell 19% in the first half of this year, according to the Census Bureau. That shaved $31.6 billion off the nation's trade deficit.

In 2011, U.S. oil and gas companies added almost 3.8 billion barrels of crude oil and related reserves, an increase of 15%, the biggest jump since the U.S. Energy Information Administration began publishing proved reserves estimates in 1977, the government said last month.